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Wal-Mart Stores, Inc and Target Corporation


Wal Mart and Target Corporation are two US- based giant discount retailers operating
around the world. The existence of such types of stores on the market is very important. No other
discount retailers are more popular than Wal- Mart and Target, and both companies have been
successful affecting many customers positively. This paper would analyze their industry market
position, strategies of companies, their strength and weaknesses (SWOT analysis). As a result
their customer centricity and strategy; they were able to generate their revenues and profits. Also,
a special attention will be given to recent trends and key success factors, code of ethics employed
by each company and their social responsibility.
The common uniqueness that Wal Mart and Target Corporation both have it the
importance on low prices. Wal-Mart is a multinational retail corporation that was founded by
Sam Walton in 1962 in Rogers, Arkansas. It operates in various chains of large discount
departmental stores and warehouse stores. Wal-Mart operates in three segments: Wal-Mart U.S.,
online retail operations, walmart.com; and Wal-Mart International which includes several
formats of retail stores, restaurants, wholesale clubs, including Sam's Clubs. Wal-Marts
segments have business in six merchandise units: grocery, electronics, pharmacy, stationery,
apparel and furnitures. The unique aspect of this company is that the segment also provides
financial services and related products, including money orders, prepaid cards and wire
transfers. Today, Wal-Mart still remains a family owned business and is the biggest private
employer in the world. Its top competitor include: target, Kmart, Costco, and BJS Wholesale
Club.
Target Corporation originally known as Dayton Dry Goods Company which is located at
Minneapolis, Minnesota was found in 1902. It is the second largest discount retailer in the United

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States, Wal-Mart being the first (Wikipedia, Wikipedia). As of Feb 2 2013, Co. had 1,778 stores
in 49 states and the District of Columbia (Mergent Online). Target Corporation includes
discount stores, promotional and traditional department stores, including direct mail and on-line
business. Target also operates in three segments: U.S. Retail, U.S. Credit Card and Canadian
Co.'s U.S. The retail segment includes all of its merchandising operations; Co.'s U.S. Credit Card
segment provides credit to customers: the Target Credit Card and the Target Visa. Additionally,
Co. provides the Target Debit Card. Co.'s Canadian segment includes costs incurred in the U.S.
and Canada related to its Canadian retail market entry (Mergent Online).
The success factors of both companies include low cost and differentiation strategy,
customers loyalty and strong brand image, string market position and continuous improvement.
Separately, the success factors (Wal-Mart strengths) measures the store locations of the company,
from a very competitive position on the market, good technology driven production and supply
chain management. The company is ruled by a team or management who are able to raise the
price level and gain more or less strong market position and also include high potential to growth
and profitability of the company, and professional management team, customer loyalty and
excellent service. Through its achievements, Wal-Mart has provided affordable and cheap goods
for its customers. On the other hand, taking into account, the strengths of Target includes:
deferential strategy, positive customer perception and they care more about reliable service and
confidence than about prices. Maintenance of high standards is a key factor to maximizing
customers satisfaction is strength of Target Corporation. The service of Wal-Mart is poorer in
contract to Target. Target designs its stores to be more attractive than Wal-Mart by having wider
aisles, drop ceilings, and a more attractive presentation of merchandise (Wikipedia, Target
Corporation). The financial growth of Targets profitability and positive customer perception

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proves that its strategic planning is successful and allows the company to attract new customers.
Also, differentiation strategy helps it to resist strongly and compete on the market.
One weakness of Wal Mart is fairly low wages. According to strategic management
insight, full-time employees earn $9.68 per hour, in contrast to national average wage which is
approximately $15.35 per hour and with that, Walmart faces labor related lawsuits every year,
which costs millions of dollars for the company. It is criticized for poor work conditions, low
wages, unpaid overtime work and female discrimination. In addition to litigation costs,
corporates reputation has been damaged and fewer skilled workers are willing to work for it
(Jurevicius). Target Corporation is very uneven in terms of supply; with a large number of
smaller operators being feature making it not diversified enough because it only operates
operates in North America and Canada. The main weakness is higher prices compared to WalMart.
Economies of both corporations are different because of their size and market share. In
2012, the sale of Target was $73,301 million in contrast to Wal-Mart sales of about $ 469,162
million. Nevertheless, target Corporation has higher income growth (73.7%) in contrast to 13.4%
of Wal-Marts income growth. The steady rise in revenues in Target has also increased net
income. Wal-Marts net income is 17, 094 Million while Target has a net income of 2,707
million.
Both Wal-Mart and Target have adopted good corporate social responsibility (CSR)
which leads to good ethical standing and goodwill. CSR of Wal-Mart involves equal
opportunity for all staff, although there may be sharp disagreement about what exactly that
means in practice. Hence, Wal-Mart has analyzed its social conditions and possible threats of
their products for potential consumers. Target Corporations CSR collects many benefits for a

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business including: obtaining high standards of performance at all levels of work force, and
reducing anxiety and confusion over what is acceptable employee conduct. Target is faithful to
its customers having a CSR as an essential perception of its business.
In conclusion, taking into account the information mentioned in this essay, it shows that
Wal-mart is better than its competitor Target. Financial growth of the Wal-marts profitability
proves that its successful and allows the company to attract new customers. Although, Target is
doing great with its differentiation strategy of selling valuable(quality) goods at lower price but
the strong market position of Wal-Mart has by it low prices which force most customers to
purchase low quality goods.

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Ratio Analysis
Company name: Wal-Mart Stores Inc.

Target Corporations

Ticker symbol: WMT

TGT

Exchange on which it is traded: NYSE

NYSE

Industry and sector: Retail and Wholesale

Retail/Merchandising

Net Sales: 469,162 Million (2012)

73,301 Million (2012)

Current Stock price: $80.25

$64.12

Liquidity Ratio
The liquidity ratios measure the short-term ability of the company to pay its maturing
obligation and to meet unexpected needs for cash. The liquidity ratios for Wal-mart and Target
have been determined through computing the current, quick and cash ratio. Wal-Marts liquidity
is fluctuating over the course of last 4 fiscal years as well as Target. For Wal-marts current ratio,
in 2009 2010 the liquidity increased and from 2011 2012 it deceased. In contrast to Target,
the current ratio increased and decreased also. For the quick ratio, Wal-marts range was in the
20s and stayed consistent over the period of years. In 2009-2012 the cash ratio decreased which
result may result in an inability to pay off current liabilities by using cash. On the other hand, the
current ratio of Target increases from 2009-2010 and then dropped from 2011-2012. The quick
ratio also decreased in 2011 and in contrast to Wal-mart, Target has the ability to pay of current
liabilities with cash, shot term investment and receivables. The cash ratio remained constant and
didnt change.
Financial Leverages/ Solvency Ratios
Solvency ratios measure the ability of company to survive over a long period of time. In
terms of financial leverage, Wal-mart has the least amount of leverages compared to Target. Walmarts total debt ratios over the four years increased from 2009-2011 and decreased slightly in
2012. This makes them a more stable company if there was ever a big shock to the market as a

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whole. Their low financial leverage shows a good portion of returns coming from sales and
effective management. The debt equity ratio increased from 2010 and remained constant. In the
case of Target, they have steadily increased leverages which could be a concern. Targets debt
ratio has been slightly increasing over the course of last three years. This is probably due to
external financing needed to support revenue growth. Target has the highest financial leverages
(long-term solvency) and would be more affected during a downturn, but would gain more in a
bull run. Wal-marts position looks very strong in this category compared to Target because
Target is more dependent on external users compared to Wal-mart. In the case of times interest
earned ratios there wasnt any data showing the interest expense for both company.

Turnover Ratios
Both account receivable ratio measures how quickly a company can convert certain assets
to cash while inventory turnover measures the number of times, on averages, the inventory is
sold during a period. Wal-marts inventory management is slacking as inventory turnover
numbers are unstable and decreasing if look at the last four years. This can be attributed to the
firms policy to stock up the inventory. The amount of inventory was high in 2009 compare to
the rest of the years. Wal-mart experiences some difficulties when it comes to collection of
receivables as average collection period is unstable. Another evidence of it is seen on balance
sheet as receivables are decreasing in the last four years. To support the growth in revenues, the
company took on more liabilities which are represented in increase in 2009 compare to the rest
of the years. In the case of Target, the inventory decreased slightly after each year and the
receivable increased progressively over the three years after 2009.
Profitability Ratio

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Profitability ratios measure the income or operating success of a company for a given
period of time. Wal-marts profit margin looks relatively stable over time and it is slightly above
Targets profit margin in some years. Wal-Marts profit margin increases in 2012 then dropped
after that year. Wal-marts boasted a strong ROA of a 9.33% in 2010. This is higher than to
Targets and slightly better because Targets was roughly 6.61%. Wal-marts is also strong in
profit margin in 2009, 2010, 2011 compared to the same years for Target. There has also been a
drop in profit margin in 2011, so further analysis would be needed. Target has the strongest profit
margin in 2012 compared to Pepsi.
In terms of return on assets, Target has the lowest numbers. The highest value for return
on assets was at 6.61% meaning 6.61% of the companys assets were used to generate net
income. For Wal-mart, the return on assets explains how effective management is used to
generate sales. 2010 was the highest year for Wal-Marts return on assets at a figure of 9.33%.
This meant that 9.33% if assets was used to generate sales.
In conclusion, the better company is Wal-Mart because of the present success shown
through the data between the other companies from the period of 2009-2012. The main reason is
Wal-Marts financial strength, which explains the confidence investors have in the company
because of their predictable future success. Wal-Mart has been able to maximize sales and profits
compared to Target. Wal-Mart leads the retail industry by a slightly wide proit margin margin, in
2009, 2010 and 2011 in retail sales

CEO Performance

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The major leaders of Wal-mart and Target are the chairman, the chief financial officer, the
executive vice president. The chairman, Greg Steinhafel and Michael T. Duke, who also serves
as the president and chief executive officer of Target and Wal-mart, are responsible in developing
and implementing high-level strategies, making major corporate decisions, managing the overall
operations and resources of a company, and acting as the main point of communication between
the board of directors and the corporate operations. The chief financial officers (CFO), John
Mulligan and Charles Holley control the treasury department as well as the internal and external
financial reports of both companies. The executive vice president, Jeffrey Jones (serves as the
chief marketing officer) and John Mulligan who is also the CFO, and brings market strategies
and operations to the company.
The CEO of Wal-Mart is Michael T. Duke and the CEO of Target is Greg Steinhafel.
Michael. The CEO of Wal-Mart is Michael T. Duke, earns $18,712,721 in a years worth. WalMart CEO Mike Duke earned $1.3 million in base salary in fiscal 2012, with maximum
performance bonuses of an additional $25 million. Wal-Mart executive pay is heavily weighted
toward performance-based pay. The CEO of Target, Greg Steinhafel gets paid $19,707,100 over
a year. Based on the financial analysis for each company, you can see that the pay of both CEOs
seem appropriate due to the success of both companies and this success may have resulted from
the hard work and strategies put together by the CEOs of both companies.
Wal-mart and Target CEOs performance can be improved by changing the rules of
operation. To compete in today's marketplace, you'll need to generate more sales while reducing
expenses and tweaking costly administrative processes. To increase sales, try cross-selling;
offering new services or goods that complement your current offerings. Also, maximize the cash

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flow of the companies by achieving a stable cash flow to offer prepaid retainers or ongoing
payment plans.

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Works Cited
Google. google Finance. 26 November 2013 <https://www.google.com/finance?q=NYSE
%3AWMT&ei=OZ-UUrDLNe7r0QH0iQE>.
. Google Finance. 26 November 2013 <https://www.google.com/finance?q=NYSE
%3ATGT&ei=L6CUUoiPCOTX0QGcJA>.
Jurevicius, Ovidijus. Strategic Management Insight. 17 May 2013. 08 November 2013
<http://www.strategicmanagementinsight.com/swot-analyses/walmart-swot-analysis.html>.
Mergent Online. 08 November 2013 <http://www.mergentonline.com/companydetail.php?
compnumber=2355>.
Wikipedia. Target Corporation. November 2005. 08 November 2013
<http://en.wikipedia.org/wiki/Target_Corporation>.
. Wikipedia. 06 November 2013. 08 November 2005
<http://en.wikipedia.org/wiki/Target_Corporation>.